The S&P BSE Auto index rose 1.17% today to close at 42,229.04, boosted by strong gains in major auto stocks. The index hit an intraday high of 42,462.81 and a low of 41,771.69 during the trading session.
The auto sector has been witnessing robust sales growth over the past few months, aided by improved consumer sentiment, new product launches and pent-up demand.
Two-wheeler and passenger vehicle sales saw double-digit growth in November while commercial vehicle sales continued their strong run.
Tata Motors Top Gainer, Jumps 3.5%
Tata Motors was the top gainer in the index today, with its shares climbing 3.52% to Rs 780.75. The company has been reporting strong sales numbers across its commercial vehicle and passenger vehicle segments. Its subsidiary, Jaguar Land Rover, also saw improved retail sales in key markets like China.
Ashok Leyland saw its stock price rise 3.51% to Rs 181.35. The Hinduja Group’s flagship company has benefitted from the recovery in the commercial vehicle industry. Its sales grew by 28% in November driven by higher mining and infrastructure activities.
Auto component major, Samvardhana Motherson International, also contributed significantly to the index gains with its stock price jumping 4.51% to Rs 102. Components manufacturers are seeing higher demand from automakers amid increased vehicle production.
Two-Wheeler Sales Rebound Provides Tailwind
The two-wheeler industry saw a turnaround in November sales after several months of decline. Market leader Hero MotoCorp reported a 24% increase in domestic sales while Bajaj Auto saw a 14% growth on the back of strong festive season demand.
TVS Motor Company also joined the growth trend with a 7% rise in total two-wheeler sales during the month.
The recovery in two-wheeler demand bodes well for manufacturers who bore the brunt of rural distress and price hikes earlier. Festive discounts, new model launches and easing inflation have revived consumer sentiment.
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Outlook Positive on Healthy Order Book, New Launches
The auto sector outlook remains positive supported by robust order books, particularly for commercial vehicles, and a strong new product pipeline. Companies like Tata Motors, M&M and Maruti Suzuki have lined up new SUV launches in 2023 to ride the SUV demand wave.
Overall economic activity continues to improve progressively. Businesses are investing in fleet expansion while infrastructure projects have picked up. Interest rates still remain lower than historical levels despite RBI’s hikes. This augurs well for auto sector demand.
Rising exports is another growth driver for manufacturers. Companies are increasingly focusing on overseas markets to mitigate domestic cyclicality. The improving chip supply situation will also allow automakers to reduce production delays and supply more to meet demand.
So in summary, the Indian auto industry seems to be back on track for healthy growth supported by both domestic and export demand. The festive season has provided a fillip but the underlying drivers remain intact.
Auto stocks are reflecting the positive outlook with most trading at 52-week highs. Investors can ride the auto sector rebound with a long-term perspective.